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New year starts with rising energy prices

January 3, 2011 | 2:37
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Retail gasoline and crude oil began the new year on the same rising course that closed out 2010.

Pump prices climbed 1.8 cents nationally over the last seven days to an average of $3.07 a gallon, according to the Energy Department. California’s average gained 2.1 cents to $3.308 a gallon. The Energy Department's Energy Information Administration tracks prices every week through a weekly telephone survey of the nation's service stations.

Crude oil climbed to a new 26-month high of $92.66 a barrel before pulling back substantially by the end of the trading day. Oil futures for February delivery ended the day up 17 cents to $91.55 a barrel on the New York Mercantile Exchange.

Oil last settled above $92 a barrel Oct. 3, 2008, when it closed at $93.88.

Analysts differed widely on how high oil might rise in 2011. New research by Sanford C. Bernstein & Co. said the commodity would reach a new equilibrium at $90 a barrel this year after spending much of 2010 in a range of $75 to $85 a barrel. Analysts for Natixis Bleichroeder Inc. said the new average this year would be higher at about $100 a barrel.

Tom Kloza, chief oil analyst for the Oil Price Information Service, warned that "we are looking at the second fuel-price apocalypse of the 21st century. Money flow is the performance-enhancing drug for prices. A spring peak in the neighborhood of $100 a barrel or higher is likely."

James DiGeorgia, publisher and editor of the Gold and Energy Advisor, also said oil would reach $101 to $102 a barrel, but he saw it happening as early as next week. Beyond that, DiGeorgia said, he expected oil to bounce between $85 and $100 a barrel for the rest of the year.

"Oil has big momentum. What’s driving it is a little bit of speculation, cold weather around the world and economic recovery. We don’t think this is a move that will take us back to where we were in 2008. We don’t see oil going higher unless there is some other outside event," DiGeorgia said.

Phil Flynn, energy analyst for PFGBest Research, didn’t think oil would rise much higher than current levels, and he didn’t think the increase would survive for long.

"We could go to $95 to $97 a barrel in the next few weeks. We’re going to start off strong and then I think that prices will pull back. If it goes much higher than that it will slow demand, and that will help keep prices in check," Flynn said.